Arise ye prisoners of Wall Street plunder
Arise ye victims of Wall Street greed and Wall Street want
For simple reason in revolt now thunders
And at last comes the age of the bailed out Banksta hunt.
Away with all those quantitative superstitions
Investor masses arise, arise
We'll change henceforth the old Wall Street swindling tradition
And spurn the toxic asset dust to win the prize.

No more deluded by fomulaic hocus pocus distraction
On systemic CEOs only we'll make systemic war
The 401k holders too will take evasive action
They'll break ranks and pay their feckless brokers no more
And if those Banker cannibals keep trying
To sacrifice our dwindling wealth to their greedy Wall Street pride
They soon shall hear the anti-bailout bullets flying
We'll kick those lowdown scheming nitwits in their lowdown scheming backsides.

Repeat Chorus

No free market saviour from on high delivers
No faith have we in principles of self regulating fear
On their thieving banker hands the chains must shiver
Chains of selfish greed and foolish fear
E'er those low down banker thieves will disappear with their bailout booty
And keep it all for their scrappy lot.
Each at the anti-bailout forge must do their duty
And we'll strike while the regulatory iron is still hot.

Treasury has announced the soon to be circulated, "Fill in the Bernanke Bank Note." The new Bills will incorporate state of the art "eraser board" technologies allowing a single note to be reissued in multiple denominations. Ben ("Ink Fingers") Bernanke said: "We are hopeful these new innovative notes will curtail upward trending printing costs at the FED."

Thursday, April 29, 2010

WASHINGON POST--The Securities and Exchange Commission has referred the ongoing investigation of Goldman Sachs to the Justice Department for possible criminal prosecution, according to a source familiar with the matter.

"The problem is the business model," Spitzer said. "The banks are playing so many roles with so many people... that nobody knows to whom they owe a duty of loyalty. Most of what they do has nothing to do with the public purpose that we want investment bankers to play."--Elliot Spitzer

WB7: There is one statement made during the ABACUS Hearing that remember very distinctly. It had nothing to do with "shitty and crappy" deals, market making, financial intermediaries, hedging, shorting a client or the like. It was the opening statement by good ol' John McCain. I won't quote it verbatim, but it went something like this: Gentleman, I don't know whether the facts will show any fraudulent or illegal behavior, I withhold judgment on that and defer to the legal system. What I do know for certain is that what happened was unethical.

I noticed in today's press that Bill Clinton made a similar public remark. These guys are not financial geniuses. Neither is the public. You don't have to be to be able to recognize what happened in the ABACUS "trade." Even a Maasai Warrior knows that (more later).

I have been thinking about Fabrice Tourre. Here is a guy who was 28 years old when he closed a very complicated transaction and made a load of dough for his bosses. He seemed to play the cards perfectly, maneuvering between Paulson & Co, ACA, IKB and ABN, without letting on what was happening and without appearing to make any overt misstatements (he is being pinned with an omission to state a material fact). What I am getting at is that this guy played a pretty good game for a lowly 28 year old VP.

While he was busy serving his Squid masters and furthering his Squid career, he also apparently had some reservations about the ethical implications of the transaction on both a macro and micro level. What else would motivate him to send those embarrassing emails to his two paramours?

If Fab really thought that something just was not right, do you think he worked in environment that would encourage a 28 year old VP to say: Hey fellas, there is something not right here. We need to step back and consider the ethical implications. No squidden way! He would have been promptly dispatched into the squid chum bucket by the three Squids standing directly to his right.

Now I am not saying Fabulous Fab would have done so. More than likely he is the blood sucking squid we all think he is.

But what if there is some other innocent VP or analyst at the house of Squids struggling to disambiguate ethical right from wrong on Wall Street. How does that poor lost junior banker save his or her conscience?

The Squid PR literature, like the rest of Wall Street, make a big shtick about their shared culture and strong team ethos. I doubt young bankers are, like lawyers, required to take an update on ethical practice every couple of years. This means, if there is an ethical grounding, it emanates from the example set by peers and mentors. You know, the three "trader" Squids standing to Fab's right. Guys who are aiming to be billionaires and out on their own by the age of 40.

What is exactly is the trader ethic that drives a place like Goldman Squid? It was made abundantly clear during the hearing that the do not see themselves as fiduciaries. They seem to think the only obligation owed to the parties was to put in place the facility for executing a "good trade." No trusted advice was given and all the financial sophisticates should have fended for themselves. This may or may not be the case.

The obligations of a trader certainly do differ from the obligations of an underwriter. A trader is on the opposite side of a trade. An underwriter is acting with an obligation to conduct due diligence on behalf of the buyer.

The problem with the transactions highlighted in the hearing was conflicts of interest. Goldman was functioning as a trader as well as an underwriter. Moreover, as we saw during the hearing, the idea of acting in the "best interests of your client" was an idea from Planet Remulac as far as the Squid witness table was concerned.

McCain and Clinton are right, putting aside the technicalities of law, what was done was "unethical" business behavior.

And now for a true WilliamBanzai7 story:

Several years ago I went on safari in Tanzania. One of the uncontrolled random contingencies that can have an immediate impact on the success or failure of a safari is the constitution of your group.

In our the group, the next bus was loaded with a family lead by a guy (I'll call him Chuck) who by my well seasoned estimation of financier types, was an American swinging dick trader from the City of London. He and his family were loud, obnoxious and typically uncouth in bush etiquette. I remember wondering why someone would let his teenage son take a skateboard to Ngoro Ngoro and Serengeti where the word "pavement" is as puzzling as a synthetic CDO squared. This did not prevent him from discovering new and better ways to apply the skateboard to its truly intended purpose: loud banging and general mayhem.

Any way, one day a few clicks past Ngoro Ngoro, our safari caravan stopped at a Masai cattle dung village (yes dung village) for some real live photo ops and local souvenir trading. The Masai are those tall and attractive natives seen in many tourist photos of Kenya. Here is a typical Masai warrior with one of his women.

The Maasai are are a simple but proud people. They have a storied cultural heritage based on cattle breeding in the East African bush. You don't want to mess with a Masai warrior. Lions have been known make a hasty retreat at the mere scent of an approaching Masai.

Getting back to the trip. After a series of tribal dance performances and in my case an invitation to go inside the chief's cow dung hut (I was the only one willing to go inside) it was time for the obligatory souvenir trading session. Cash for trinkets, blankets and spears.

Enter Chuck, I remember Chuck complaining bitterly at lunch that one of his Teva sandals had broken. He tried to fix it but they were now useless, beyond repair.

There we were in the this Maasai mud village buying souvenirs not because we felt a sudden midday urge to buy trinkets in the hot Savannah sun, but because we felt sort of obligated to support the economy of these proud Maasai who are clearly living a proud but subsistent life style. And there was Chuck making a trade. Somehow he managed to string the Tevas together in a way that made them appear to be in good operating condition. He offered to trade them with a Maasai warrior for his personal shield and spear.

Now I am sure this warrior was not planning to part with his shield and spear that day, but the temptation of getting a genuine pair of high tech TEVA sandals was much too much to bear. Chuck got his spear and shield and the Massai got his TEVAs.

Five minutes later an argument broke out. The Maasai put or tired to put the sandals on and promptly realised what Chuck already knew. Those sandals were shot to hell, no amount of marine epoxy glue was going to get the strap to stay in the rubber sole. Useless junk! I remember the hapless Maasai (who spoke no English) holding the sandals up demonstrating their obvious uselessness. I also remember Chuck's words as he quickly retreated to his bush bus: Good trade! It was a good trade!

Later the group asked Chuck was it really right and necessary to dupe that Maasai out of his spear and shield, even if he had a hut full of spears and shields. Chuck would not relent: It was a good trade!

That Maasai learned an important lesson about trading with obnoxious American tourists that day. It had something to do with trust, due diligence, the law of the trade and the words "caveat emptor." Words that Wall Street loves to banter around these days. When I hear those words I am reminded of two other words: Ford Pinto.

What other important lesson did I learned that day: Don't ever go in there!

BANZAI7 NEWS--The harmful business practices revealed by the SEC lawsuit and recent Congressional hearings may make the heads of Goldman Sachs seem infected with a particularly virulent strain of squid greed. But it might be only the scale of their payouts that distinguishes their alleged wrongdoing from how the rest of Wall Street behave. They were simply over-expressing a universal drive shared by all squidkind, albeit in an environment that encouraged a "preverted" example of such behavior, experts say.

Greed occurs when the natural squidly impulse to collect and consume useful resources like tasty shell fish, lucite cubes, Italian sports cars, corporate jets, Hampton Dick Mansions, trophy silicone implantees and other material wealth or fame overwhelms the constraints that maintain the social ties in a group, said Andrew Lo, an MIT professor who researches the relationship between neuroscience and economics.

These chemicals in turn act like drugs, causing what could best be defined as an addiction to shitty deals generating more and more fees and commissions. The natural consequence of this is for these individuals to continue to accumulate the same things that give them pleasure, often at the expense of their most trusted clients. Greed addicts typically will show little remorse for throwing their closest business associates over the transom to save their own squid treasure hoard.

Time was when an American about to invest abroad would be warned by his friends to be wary of emerging market fraud. But times have changed and now a foreigner coming to this country might be offered the following advice.

If you visit New York city,
You will find it very pretty.
Just two things of which you must beware:
Don't go near Goldman Sachs and don't buy AIG shares.

Financial pollution,
They got asset backed sewage and sludge.
Turn on your trading screen and see long and short running crud.

See the halibuts and the sturgeons
Being wiped out by fraudulent urgins.
Fish gotta swim and birds gotta fly,
But they won't last long with those toxic schlock guys.

Financial pollution,
You can use the latest quantitative toothpaste,
And then rinse your retirement accounts with industrial subprime waste.

Just go out for a breath of transparent air,
And you'll be ready for financial Medicare.
Wall Street investing is really quite a thrill.
If the street hoods don't get you, Goldman's asset backed bankers will.

Financial pollution,
Wear a gas mask and a veil.
Then you can invest, in another toxic asset sale.

Lots of things there that really stink,
But stay away from Goldman's CDO kitchen sink.
Throw out the synthetic garbage and I've got a hunch,
That the folks from IKB and ABN will eat it for lunch.

So go to the city, see the crazy people there.
Like lambs to the slaughter,
They're drinking quant ponzi water
And breathing Wall Street's hot air.

NYP--Goldman Sachs may soon settle its fraud case with the Securities and Exchange Commission, opting to end the legal fight rather than endure a repeat of the public flogging it received Tuesday in Washington, sources familiar with the matter told The Post.

After 11 hours of accusations by members of the Senate Subcommittee on Permanent Investigations, people close to the bank said Goldman is mulling closing the SEC fraud-case chapter on the belief the firm's "shitty" reputation, already damaged, might not endure a street fight with the Wall Street watchdog.

Wednesday, April 28, 2010

In a move designed to counter pressure from market speculators, the Greek Parliament has unanimously passed a law imposing mandatory license fees on all securities trades based upon hedging strategies and pricing formulas utilizing letters of the Greek alphabet (aka the "Greeks"). As usual, the devil is expected to be in the details.

"They think they can take our alphabet and use it to destroy our economy. This is an insult that cannot be tolerated."--Prime Minister Pappy Papandreou

You see, the facts will finally show that we did not actually...rob any bank. This gentleman here merely held what appeared to be a gun in his hand. We do not know if in this particular circumstance the gun was loaded or if it was in actuality a gun.

This gentleman only opened the front door of the bank to see if it was crowded. Perfectly legal if I may say so. As for this other capable gentleman, he only said where's all the Francs, I meant cash. I myself only said please fill this bag. Technically, I did not say put money in the bag. I could have meant many other things like shit, crap junk or lemons. Pure speculations!

I would like to add, that the bank personnel were all highly sophisticated. They were absolutely able to fend for themselves.

So you see, none of us in fact did anything wrong in these circumstances. I am insulted my the insinuations concerning my good name.

Here is a little song I wrote
You might want to sing it note for note
Don’t worry be happy
Every century we have some Wall Street trouble
When you worry you make it double
Don’t worry, be happy……

Ain’t got no safe place to lay your nest egg
One of these days it’ll crumble and you’ll have to beg
Don’t worry, be happy
Wall Street’s full of crooks why investigate?
One of these days you may have to litigate
Don’t worry, be happy
Look at me I am happy
Don’t worry, be happy
Here I give you my cell phone number
When you worry call me
I make you happy
Don’t worry, be happy
Ain’t got no dark pools, ain’t got no black box no fancy hedging style
Ain’t got no algo trade to make you smile
But don’t worry be happy
Cause when you worry
Your face will frown
And that will bring the market down
So don’t worry, be happy (now)…..

There is this little song I wrote
I hope you learn it note for note
Like good little investor children
Don’t worry, be happy
Listen to what I say
In your life expect some big market trouble
But when you worry
You make it double
Don’t worry, be happy……
Don’t worry don’t do it, be happy
Put a smile on your face
Don’t bring everybody down like this
Don’t worry, the jobless recovery is here at last
Whatever it is
Don’t worry, be happy

Here is my take on the the first part of the Goldman Hearing. You have three guys who made millions buying and selling mortgage backed securities as "market makers" and as principals acting for their firm. The other guy, Fab, originates the junk sold by the other three.

None of them are able to answer basic questions such as "Do you think you had an obligation to act in your customers best interest" "Is it ok to sell a shitty deal to your clients without telling them you are betting against them".

They collectively blame "too much credit in the system", but the inherent conflict of combining the role of prop trader with originator and underwriter/selling agent of risk securities blows right over their heads.

What you are seeing a total lack of ethical grounding caused by conflicting business interests. All they were able to say is: it is a complicated question, we have strong ethics, but we have to be prudent.

There clearly is no bright line delineating proper and improper behavior in this, the most "storied firm" on Wall Street. Imagine the crap going on around the block and around the corner.

BANZAI7 NEWS--Alien encounters may seem like sure-fire winners to Hollywood, but one of the world's most famous scientists thinks, Wall Street aliens may be "too risky" be be worth seeking.

In a documentary that premiered on Sunday, Stephen Hawking said that communicating with Wall Street financiers poses threats to Earth far worse than communicating with extraterrestrial aliens.

Hawking said a visit from extraterrestrials might be similar to Goldman Sach's arrival in the Americas.

"If aliens visit us, the outcome would be much as when the Goldman founders landed in America, which didn't turn out well for the Americans," he said. "We only have to look at our economy to see how super-intelligent life might develop into something we wouldn't want to meet."

In the new program, "Into the Quantitative Vortex with Stephen Hawking," he speculated that bankers' capabilities "would be only limited by how much high frequency ("algo") trading and financial modeling power they could harness and control, and that could be far more threatening than we might first imagine."

He said it might even be possible for bankers to monetise and "unlock" the assets of an entire solar system or maybe even galaxy.

International "market makers" have been engaged in writing forward delivery contracts and running the local futures exchange for many years. But there is only one intermediation syndicate that is 2Big2Fail...This is their story.

THE ATLANTIC--Goldman Sachs was not the only investment bank selling the complex securities that ultimately resulted in staggering losses for the German bank IKB Deutsche Industriebank. Traders at Deutsche Bank sold similar collateralized debt obligations (CDOs) -- built from credit protection on a portfolio of mortgage-backed securities selected in consultation with hedge fund manager John Paulson -- to the German bank. And like Goldman, Deutsche Bank didn't reveal Paulson's role in the construction of the CDOs. So far, the SEC has not charged Deutsche with fraud relating to these transactions.